The metaverses challenges by Frédéric CAVAZZA

Metaverses, Decentralized finance, Web3 and NFTs are themes which are gradually arousing the interest of digital neophytes. Adept for around for 25 years of subjects revolving around web and digital transformation, Adept for around 25 years of subjects revolving around web and digital transformation, Frédéric Cavazza gives us his vision around the challenges of today and tomorrow metaverses.

 

You explained in your article on “The metaverse is a digital loophole to GAFAM” that brands setting up in virtual spaces are betting more on a growth in brand awareness than on profitability. But if the Meta group would finally be able to thwart the propensity of other metaverses, what solutions are left for brands to free themselves from this monopoly?

In truth there are few. Metaverses are media, a means of transmitting messages. But metaverses are more than communication media. They host 3D environments and host experiences. They require very expensive technical infrastructures as well as teams of state-of-the-art developers to be able to offer differentiating functionalities. All this represents colossal costs and as a bonus, you have to recruit users, encourage them to create an account. According to this reading, Meta clearly has a head start with its 3 billion captive users as well as a $10 billion R&D budget, giving it a huge advantage in the metaverse race. The same goes for Google, Microsoft or soon Apple. As to whether Meta will thwart fledgling start-ups in the metaverse niche, only time will tell. But what they lack is a large audience, likely to make their business model viable and attract many advertisers.

The observation is therefore that brands find themselves without any real solution in the face of these monopolies. The metaverses nevertheless remain interesting supports to explore, because they represent a market in the making without a real monopoly (for the moment).

 

If the main challenge of the metaverse is ultimately to meet user expectations and create new uses, what could these expectations and uses be in your opinion?

By way of expectation, there would first be the desire for novelty, given that we have explored practically all the possible uses on our smartphones. We already have messages via social media, photos, videos in several formats including Instagram reels, Snapchat stories, Tiktok challenges, etc. Users continually aspire to novelty and 3D environments will certainly be this door to the new, coupled with the appropriation of avatars etc.

The need to escape is also an issue that metaverses tend to respond to. The last three years have clearly not been happy for humanity and this desire to escape the everyday life will push users to go to alternate realities.

With repetitive confinements, the already growing video game sector has exploded. I’m talking about video games because in my opinion, video games and metaverses must be linked. The metaverse as many know, is nothing new. And the age range of video game players is more around thirties, in other words, the audience most likely to use the metaverse.

 

Do you think that today’s metaverse ticks the boxes of what can be called “innovation”?

The metaverse in my opinion is not an innovation, because it has existed for many years already. Virtual universes have existed for twenty years (see Second Life), virtual and augmented realities for fifteen years. The term metaverse itself is thirty years old. Above all, it has been brought up to date, thanks to a new architecture and new functionalities.

 

You talk a lot about the metaverse as an incremental solution, which will allow us to move to a higher level. Don’t you have the same vision of NFTs? 

“The NFT has no equivalent in the history of digital uses”

It can be considered an innovation because before we had no equivalent. The marketing of digital certificates of authenticity is something completely new. As far as uses are concerned, it is bound to evolve. For the moment, for an artist to be able to make it an additional source of income is, in my opinion, a beneficial and interesting use. However, I believe that this will remain a niche sector, bringing together communities of enthusiasts or collectors.

As for brands, they are obviously not all eligible for the NFTs adoption. Nike, for example, has had every interest in harnessing the power of its brand through NFTs because it appeals to an audience of collectors.

 

You said that Meta group was best able to build the metaverse as it is truly conceived. Do you think it can miss this opportunity? What do you think are the factors that would lead to the failure of Meta in its deployment of tomorrow’s “metaverse”?

Meta for starters has the technical infrastructure to build a complete metaverse. And few companies have it (Google, Amazon and Microsoft for example). In addition to the technical infrastructure, the necessary skills and financial means are needed. And for the moment, Meta or Microsoft are the best able to carry out this major project.

However the main factor of failure of Meta in the progression towards the metaverse would be the economic factor. Today, an average user is equipped with a smartphone, a computer, a TV… These objects are to be renewed approximately every 3 to 5 years, which means that there is a prioritization and budgetary arbitration in purchases. If, apart from these devices, the average user must also have a virtual reality headset that they must also replace periodically, this may seem to be a major obstacle to adoption. Otherwise this technology would be aimed at the wealthiest, and there it would greatly reduce the addressable base.

For the moment, we can hardly consider in the short or medium term an addressable base close to a billion users, except to broaden the definition of the metaverse and to include online games.

 

What do you mean by the innovator’s “dilemma”?

The dilemma of the innovator is the fact of being first and dominating its market, of being profitable, and therefore of having all the pawns on its side to initiate, if not succeed, a transformation, but prefer to stay in its comfort zone. What generally happens is that these companies will be hampered in their race for innovation by their shareholders who are expecting dividends. This situation can potentially be a major obstacle to the transformation of a company. After all, why take the risk of transforming when you’re a market leader? Those who are not leaders, on the other hand, will have less to lose by trying to establish themselves in other markets. And this state of affairs shows how much Meta has done what no digital juggernaut had done before: at the height of glory, they still decide to transform into Meta, to better establish themselves in virtual universes, it is a tangible proof of audacity and ambition.

 

If for you the future of the metaverse lies more in video games than in crypto, isn’t there a way to reconcile the two?

I don’t see any. The world of crypto has its uses, in particular digital wallets which remain quite laborious for the unaccustomed, if not intimidating. And if the European Union or the tax administration gets involved, it is likely to greatly reduce the growth potential of a combination of these two. In France, for example, we are on barely 8% of the population according to an Ipsos study that uses crypto. Not to mention that the actual winnings are only about 50% of the profits, since there are significant exit costs and the profits are taxable. Crypto is likely to remain a niche sector, with speculators, collectors on the one hand, and communities of action through DAOs (Decentralized Autonomous Organizations) on the other.

The only real way to democratize cryptocurrencies would be to go through an intermediate step and the deployment of digital currencies legalized by states, as in Brazil with Pix. We already have digital payment systems in France (PayPal, PayLib, Lydia…), but the State involvement to legalize a 100% digital payment platform would be an excellent way to break the psychological locks of consumers and develop uses. The next logical step would then be to adopt alternative digital currencies, cryptocurrencies, but we are not there yet…